Not many issues bother the Nigerian economy the way oil and gas do; and for reasons beyond control, the entire world grapple with these same issues owing to high or how price of oil products. The oil and gas sector provides large energy on which every economy runs, ranging from the developed industrialized west to the food processing plants in the developing countries such as ours. Oil and gas exerts a level of influence on every economy, irrespective of their level of development.
YOU CAN ALSO READ: THE IMPACT OF OIL SECTOR ON THE NIGERIAN ECONOMY
The oil and gas, no doubt, are not evenly distributed however. This is due to the disparities in the geographical locations within time and space. As a consequence, many countries depend on others for oil and gas supplies. Until recently, Nigeria and other African countries such as Algeria, Libya etc. have been the major oil producing countries in the world.
However, the unequal distribution of oil and gas in Nigeria, particularly, has given rise to politics surrounding the commodity both at the state level, national level and at the international market at large. Inasmuch as the oil and gas sector has been the major source of the national internal revenue, it has also caused a lot economic setbacks through the following ways.
- Major Source of Revenue: The oil and gas sector has been the major export commodity of Nigeria for many decades. It has been the wheel on which the Nigerian economy runs. Aside revenue gotten from exporting oil and gas, the oil producing firms pay royalties to the government after oil explorations.
- Economic Diversification Default: Often times, people wonder if the availability of oil and gas in the country is actually a blessing or a curse. This is because, since the discovery of oil, the Nigeria government has been hesitant over diversifying the economy. There is too much dependence on oil and gas. As a result, the price of the commodity in the market determines the economic condition. Long term decline in the price of the commodity weakens the economy to the barest minimum.
- Job Opportunities: The impact of oil and gas sector on the Nigerian economy as spurred job creation ranging from the highly technical to the least technical. Especially in the Niger Delta region where many of them did not acquire adequate formal education, job opportunities even at lower levels have been provided including driving, cleaning, and other messengerial functions.
- Economic Fluctuations: The oil and gas sector has pulled the market structure of demand and supply into great conflict. On the demand side, the oil consumer’s aim at policies that will favor them while the supply end aim at making the most of the profit. This has resulted to the fluctuation in the prices and avail ability of oil and gas within and outside the country. The rise in the price of oil and gas in the international market results to economic boom while the fall in the price of this commodity reduces the national income, the national budget, default in debt obligation and subsequently the fall in the standard of living of the country.
- Environmental Degradation: The oil and gas sector of Nigeria has remained at the mercy of multinationals who mostly have their headquarters at their home countries. This is majorly because of the highly sophisticated technological requirements for oil explorations and processing. Meanwhile, the Niger Delta region, the bed rock of the Nigeria’s oil and gas suffer the aftermath of the oil exploration. The oil and gas exploration activities has resulted to condemned farmlands, water pollution and has dislocated many of the rural dwellers from their homelands. Many of them depend on seafood’s as a means of survival, but the activities of miners disable fishes from breathing in water, mostly oil spillage. It subsequently affects the standard of living of these people.
YOU CAN ALSO READ: A CRITICAL EVALUATION OF MONETARY POLICY ON THE NIGERIAN ECONOMY
Conclusively, the oil and gas sector of the Nigeria has impacted both positively and negatively on the economy. It has created many Job opportunities as well as serve as a major source of revenue etc. However, a lot economic challenges have resulted. Some of these challenges vary with environmental degradation, economic fluctuation and others which space would have failed to mention.
Meanwhile, Nigeria stands a chance to develop its oil and gas sector through fight against exploitation and corruption. It can also be managed better through economic diversification.